HUL to consider special interim dividend on July 21; stock hits 10-wk high

Shares of Hindustan Unilever (HUL) hit an over 10-week high of Rs 2,274, up 2 per cent on the BSE on Monday after the company announced that its board will meet on July 21 to consider special interim dividend. The stock of the fast-moving consumer goods (FMCG) giant has gained nearly 5 per cent in the past two trading days. It was trading at its highest level since April 30, 2020.

“A meeting of the board of directors of the Company will be held on July 21, 2020, through audio-visual to consider the proposal for payment of interim (special) dividend, if any, for the financial year ending March 31, 2021 (FY21),” HUL said in an exchange filing.

The board will also consider the financial results for the quarter ended June 30, 2020 (Q1) along with the limited review report of the auditors for the corresponding period, it said.

Earlier in November 2012, HUL had paid a special dividend of Rs 8 per share, the BSE data shows. For the previous financial year ended March 31, 2020 (FY20), the company had paid a total dividend of Rs 25 per cent, an increase of 14 per cent, over the FY19.

According to analysts, for the April-June quarter (Q1FY21), HUL is likely to witness a revenue decline of 2.4 per cent (including acquired company's sales). Though the company was able to start manufacturing in mid-April, it only reached the previous year’s levels by June 2020. 

“However, we believe HUL would have been able to refill the inventory at the distributor level by the end of June 2020, which would have absorbed some of the lost sales in April & May. On the demand front, we believe personal care (cosmetics) & ice-creams would have been severely impacted with a near washout quarter for both categories. However, soaps, sanitisers would have seen strong growth induced by increased consumer awareness about hygiene,” ICICI Securities said in result preview.

The brokerage firm expects 12 per cent and 13 per cent revenue decline in the home care & BPC (beauty & personal care) categories, respectively. With benign raw material cost, reduction in A&P spends and other cost-cutting measures, it expects the company to maintain operating margins at 26.5 per cent (35 bps higher). PAT is likely to grow 7.9 per cent aided by profits from GSK acquisition and lower income tax, it said.

Analysts at Spark Capital expect low teen volume decline in core HUL portfolio impacted by a sharp decline in the personal care segment. The nutrition business is to report a flat or marginal decline in revenues aided by a surge in demand for at-home consumption.

Despite the benign RM prices (palm oil), lower A&P spends during the lockdown period and cost-saving initiatives, operating margins are expected to decline on a YoY basis due to sharp topline decline. However, PAT decline should be marginal due to lower tax expenses, the brokerage firm said.